Digital Makeover

How L'Oréal Put People First to Build a Beauty Tech Powerhouse

Béatrice Collin, Marie Taillard

• Publisher: Wiley
• Year: 2021
• ISBN:
  9781119706014
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Get an insider's perspective intohow this 110-year old world leader in beauty built on its legacy to transform itself into a digital and tech powerhouse

Digital Makeover: How L'Oréal Put People First to Build a Beauty Tech Powerhouse examines L'Oréal'ssuccessfulpeople-drivendigital transformation.Professors and authors Beatrice Collin and Marie Taillard set out exactly howL'Oréalturned itself into a digital and tech powerhouse bybuilding on its legacy toreimaginerelationships inside the company, and with its customers and partners.

Digital Makeover comprehensively describesL'Oréal'sstrategy, including:

• Maintaining market leadership in the face of disruption
• Believing in thetransformativepower of theorganization, its legacy and its people
• A social-centric approach to beauty tech, ecommerce and digital services
• The company's successful play for market dominance in China
• Case studies that showcase best practicesfor digital transformationacross sectors

Digital Makeover is perfect foranyone interested inbusiness strategy, marketing, or digital transformation, as well as businesspeopleand leaders frominside and outside the beautyindustry andbelongs on the shelves of anyone withan interestin organizational transformation, management, leadership, and digital strategies.

I
Four Foundational Pillars

High on the list of digital disruptions experienced by established beauty companies is the appearance and success in the market of newer and distinctive “indie” brands, many launched by celebrities and other influencers with direct‐to‐consumer (DTC) access. Some benefit from a founder's following (Kylie Jenner's Kylie Cosmetics, Rihanna's Fenty, Kim Kardashian's KKW), a specific target (teenagers, women with problem skin, Black professional women), or a particular type of products (plant‐based skin care, clean beauty) and often elicit passion from their communities of customers.

The DTC model is efficient and promotes a high‐touch, intimate, and trusting relationship with customers that is conducive to strong loyalty. One of these brands, Glossier, originally built up as a beauty blog, is now a successful brand of “natural look” products sold to its huge and passionate community of followers. Indie brands have eaten into the market share of established legacy brands in recent years, ranking high on the “what keeps me up at night” list of many legacy company executives.

L'Oréal has successfully maintained its dominance in the face of the indie challenge. Besides its deeper pockets, the magnitude of the data its brands can access, share, and exploit, the reputation of its brands, and the scale of many other resources, L'Oréal benefits from an accumulation of decades of experience, expertise, knowledge, and culture. These intangible assets have enabled its brands to reimagine their business models by nurturing new markets, testing out new products, taking calculated risks, learning on the fly, and generally taking a more patient long‐term perspective than the newer players can afford to.

In this first part of the book, we will focus specifically on how instrumental L'Oréal's rich cultural legacy has been to its digital transformation and ability to withstand the indie challenge. Although it represents only one aspect of digital disruption, the indie phenomenon underlines how digital technology has transformed the way humans relate to one another, and has created opportunities for new, more relevant social interactions and relationships. L'Oréal's more than one hundred years of experience and accumulation of time‐tested cultural practices have served it particularly well in this context.

We will focus on four pillars, which our thorough analysis and experience of L'Oréal's culture have helped us identify: orchestrate creativity, cultivate healthy doubt, learn and innovate with rigor, and listen with curiosity. We call these four elements pillars because they constitute the foundation of L'Oréal's culture and account in great part for its fortitude. Far from being immutable, these pillars owe their robustness to the way they have developed and risen as a result of changing contexts and leadership styles. It is, again, this balancing act between deep loyalty to the past and a healthy desire for innovation that has made L'Oréal's culture and its pillars highly adaptive and made it so successful in the face of digital disruption. We now look deep into the company's history to uncover these pillars as they have been fashioned by the women and men of L'Oréal through their day‐to‐day work and practices over the past ten decades.

1
ORCHESTRATE CREATIVITY

Mention digital transformation and you conjure up ideas about e‐commerce, social networks, and big data. Too often, we overlook the fact that it is also about the strategic and organizational processes within the company itself. Digital transformation brings with it profound organizational change, a change that relies on and impacts individuals deep in the ranks of the company yet requires coordination by a strong leader.

At L'Oréal, CEO Jean‐Paul Agon initiated and orchestrated the transformation by preaching relentlessly for change and by drawing from the company's legacy and culture to activate the transformation. L'Oréal has a long tradition of balancing creativity and inspiration with discipline and scientific rigor, whether it be in its dual‐channel approach to research or its distinctive market‐entry strategies. When encouraged to emanate from deep within the organization, creativity delivers innovative solutions that are truly relevant and responsive to the market. Scientific discipline and rigor can boost the impact of disparate solutions from across the organization by turning them into explicit knowledge to be shared throughout the organization.

For Agon—faced with a double objective of bringing the entire organization on board and transforming it through and through—the tried‐and‐true blend of creativity and rigor offered a natural path forward. Although the need for a profound transformation seems obvious in retrospect, the 2010 context in which Agon declared a digital emergency was very different from our current understanding of the business landscape. Having had the vision and confidence to declare a digital emergency, Agon not only needed to get buy‐in throughout, he also had to think ahead to how he would operationalize the transformation more broadly. In resolving this dilemma, Agon's priority course of action combined a strong and urgent message from the top with an invitation to the entire organization to innovate and improvise.

Enabling improvisation is an important way for a leader to blend creativity and discipline. Jazz music is legendary for its reliance on improvisation, as illustrated by the story of trumpet player and bandleader Miles Davis's recording session for his 1959 album, Kind of Blue. Davis showed up at the recording studio with two new musical modes that had never been played before. With no time to reflect on how to use these modes, band members had to improvise by integrating them into the performance at the same time they discovered the modes: they combined the creativity of adapting the forms to their own style and mood with the rigor of sticking to the required forms. Kind of Blue turned out to be one of the greatest jazz recordings of all time. No time to ask questions—just discover, dive in, and improvise. Agon's digital emergency declaration was nothing short of the proclamation of a new type of musical harmony for L'Oréal. While the score was being written, he demanded that the entire organization face up to this new beat and let it guide and inspire future initiatives. These improvised responses, tentative and disparate at first, would eventually be harmonized and made to rise into a full‐blown collective achievement: creativity integrated with discipline.

Having inspired improvisation, Agon launched the second phase of L'Oréal's digital transformation by appointing a CDO. There was still plenty of room for improvisation but, little by little, improvised practices were formalized and shared across units and supported by the new leader as cohesion, harmony, and systematicity traveled from the parts to the whole. Throughout the process, Agon held on to his evangelist role by consistently delivering the same urgent and reassuring message: digital is our collective imperative; it starts with you, but it belongs to all of us.

The Importance of an Evangelist

Digital transformation is first and foremost a change process. And, as with any significant change, it requires strong leadership and determination if it is to succeed. This simple statement does not, however, capture the true complexity of transformation. And this is particularly true for a digital makeover, where everything ranging from new products to new partnerships, new manufacturing processes to new supply chains, new practices to new functions and business units has to be rethought from scratch. It must all be reimagined and reinvented, often in real time, and in a context of great uncertainty, volatility, and, very often, anxiety throughout the company.

From the start of his digital mission, Agon was driven by his profound belief that the moment for transformation had come and that any delay would severely jeopardize the future of the company. Having decreed 2010 “the digital year,” he embarked on a crusade to convince L'Oréal's employees that digital transformation was no longer optional, a message he reinforced consistently and vehemently over time. In true L'Oréal fashion, much of Agon's conviction came from his observations and discussions with leaders across sectors and his thorough understanding of the sector and the market. He notes, “Some friends in the digital world were explaining what was going on, and I realized a tsunami was coming. I could see it from far away.”¹ Throughout the history of L'Oréal, the CEO's personal conviction provided the impetus for major changes; that conviction has often developed organically through personal experience, sometimes serendipitously, other times more systematically.

Among L'Oréal's direct competitors, French cosmetics house Clarins had already begun to make significant strides in digital transformation. On the retail side, Sephora was developing innovative approaches, particularly in the United States, built on data collection using its loyalty programs and e‐commerce platforms. While L'Oréal's direct big competitors were increasingly investing in digital media and distribution, none of them had undergone a wholesale digital transformation. Similarly, digital had yet to accelerate the beauty sector's massive shift toward the ascent of indie brands, often led by highly influential celebrities. Agon's crusade was motivated by his faith in the power of digital, but it also reflected his recognition that there were no simple rules of the game for how to go about orchestrating a digital transformation. There was no roadmap and Agon wasn't about to pretend to have one.

One thing Agon understood from the very beginning is that digital transformation, more than any previous type of change initiative, must involve the entire organization and, beyond that, the whole system around it, including its customers and partners such as distributors, retailers, and others. Not only does digital transformation foster greater participation within the entire system, but it can only happen through a participative process, a lesson that brands learned the hard way early on when they tried to censor customer reviews or critics. In 2010, having been accused by Greenpeace of using unsustainable palm oil in its KitKat bars, Nestlé tried to silence the critics by claiming their video, which had gone viral, broke copyright laws. The social media uproar was such that the company had to reverse course. It learned that the power of consumers could not simply be ignored and instead had to be used as an opportunity to better understand and respond to their needs. Nestlé eventually learned to engage with its critics and the wider market, and used the opportunity to overhaul its product sourcing and policies.² The very nature of digital technology is that it allows information to circulate freely and to be shareable. Once let loose, information is there to be used by anyone who has access to it and is able to, or chooses to, participate. This is true for...